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December 27, 2013

Unemployment benefits for 1.3 million expire Saturday. Here’s why.

On Dec. 28, roughly 1.3 million out-of-work Americans will lose their unemployment insurance. That's because Congress declined to renew an emergency aid program for the jobless that's set to expire that day.

(Photo by Joe Raedle/Getty Images)

(Photo by Joe Raedle/Getty Images)

This could still change: Senate Democratshave said they'll come back in early January and try to renew the Emergency Unemployment Compensation program for another year, which would cost roughly $25.2 billion. But if that effort fails, the nation's safety net for the unemployed will shrink significantly in 2014.

So, here's our primer on what this emergency unemployment program is and why it's shrinking, as well as the arguments for and against renewing it.

What is the Emergency Unemployment Compensation program? Theunemployment insurance program, which dates to 1935, provides laid-off workers with a fraction of their old salary for a fixed period of time while they search for a new job. In 2008, Congress expanded this program to deal with the recession. That expansion is what's at issue.

To get more specific: In normal times, the states and federal government work together to fund up to 26 weeks of unemployment benefits. (The precise number varies from state to state — North Carolina only provides up to 19 weeks, Michigan 20 weeks.) When unemployment is particularly high, states can usually get some federal funding to provide an extra 13 or 20 weeks of "extended benefits."

But starting in 2008, Congress expanded this program significantly. First, the federal government promised to pick up the entire tab for those "extended benefits" and made it easier for states to receive this money. Second, Congress created the Emergency Unemployment Compensation program to provide additional aid to workers when their state benefits ran out.

This additional financing has shrunk somewhat from its peak — currently only about one-third of the 4.1 million long-term unemployed receive benefits, and budget cuts have pared back benefit levels. Even so, at the moment, many states still offer up to 63 or even 73 weeks of unemployment aid, and benefits average around $300 a week.

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